Ms. Heinze is a freelance writer based in Vancouver, British Columbia.

Undeniably, for anyone in retail
these days, it is touch and
go—although consumers are
still spending, they are demanding
that their dollars go further. Impulse
buys are no longer so impulsive, and
large purchases have, in many cases,
been put on hold. Among the retail
establishments out there, pharmacies
are arguably in an enviable position—
whether the economy is strong or
weak, individuals still need their medicine,
which drives traffic through the
front end of the store.

Still, pharmacies are not entirely
recession-proof, requiring owners to be
wise in their front-end retail strategies.
Although the temptation may be to cut
back and batten down the hatches for
the rough ride ahead, the risk is that
if the store appears too sparse, the
owner may be projecting an image that
is detrimental to the pharmacy's overall
well-being.

"The front end of your store is less
than 10% of your business, but it is 90%
of your image," says Gabe Trahan, an
independent consultant and director of
retail services at Burlington Drug in
Georgia, Vermont. "Independent pharmacies
have got to control their inventory
in a better way."

He argues that carrying 1 or 2 units
of each item sends the message that the
product is so expensive that even the
pharmacy itself cannot afford to stock
it. "I fear that, in this economy, the
independents and even the chains are
going to cut back on inventory, which
makes it look like you are almost out
of business." If your front end is poorly
stocked, he challenges, why would customers
believe that the situation is any
better behind the prescription counter?

For independent pharmacies, the
items that are often the most difficult
to move are the "B" of HBA (health
and beauty aids): oral hygiene, skin
care, deodorant, and hair care products,
which see considerable markdowns
in the big boxes. Trahan argues that
independent pharmacies should reduce
their prices in line with what the larger
chains are offering in an effort to keep
the customer in the store.

"You are never going to get rich selling
HBA, but if you are just a little high
on the stuff that you do not sell much
of, you are telling your customer: ?Get
your prescription filled here, but go and
get your toothpaste somewhere else,'"
he says. Chances are, the retailer that
is selling toothpaste at a lower price
probably fills prescriptions as well.
"Someday, that person is going to be so
busy that they are going to see what the
competition can do on a prescription."

Trahan advises pharmacies to assess
their least successful departments and,
on the price-sensitive items (such as
toothpaste and hair care), reduce the
price—even if this means cutting into
your margin. "You are not selling it anyway—
you are chasing people to other
people's stores," he says. "This is a loss
leader that actually keeps people in your
store." Instead of adding departments
such as photo developing or expanding
gift departments that have little to
do with health care, he urges pharmacies
to be more strategic on pricing the
products
they carry already—and have
knowledge about. "The front end may
not be a big part of your business, but
it is a big part of your image. If the front
end is slightly higher-priced than most
stores, then it is going to be tough to
recruit a new Rx customer, because
they are going to think you are expensive,
regardless of whether or not there
is a third-party payer."

If you believe that expansion in some
areas is necessary, examine what your
customers' needs are: plenty of potential
exists to develop comprehensive
departments dedicated to diseases such
as diabetes, arthritis, and bone density.
"Instead of being a supplier, pharmacies
have to become a partner to their customers,"
Trahan says. "Our clients are
looking for more than just getting their
prescriptions filled. If you say to them,
?let us be a partner with you and your
doctor,' it will be a big attraction."

Medicine Shoppe International is
endeavoring to do this by maintaining
a solid focus on patient care. The company's
specialty centers concentrate on
specific disease states, such as diabetes,
as well as home health care. "We are trying
to make disease state management
more prominent in our stores," explains
Mark Kenkel, Medicine Shoppe's director
of OTC, adding that these are some
ways in which the organization can differentiate
itself from the larger chains.
"We understand who our patients are
and what the age of the general population
that comes into our store is.
Demographics play a big part of it; we
need to offer these specialty care items
that are going to differentiate us from
the big boxes."

Another way that pharmacies are
differentiating themselves is by establishing
in-store clinics to drive traffic
through the store—an effort that Mary
Kate Scott, principal at Scott & Co Inc,
a consulting firm based in Marina Del
Rey, California, says is very much in alliance
with the current economy. "If you
think about the rising health care costs
and increasing interest of consumers in
their own health care, it is no surprise
that the consumer likes and prefers the
retail clinic," she says.

Although the construction of an in-store
clinic may seem like a considerable
investment—especially in a down
economy—independent retailers have
the option of outsourcing the service to
a retail clinic operator or a health care
provider, such as a hospital system.
"If you are an independent pharmacy
owner with 1 or 2 stores, it is probably
pretty challenging to set this up on your
own," says Scott. "You will probably
see greater success by working with a
partner—whether that is a retail clinic
operator or a hospital." She adds, however,
depending on the organization,
it is possible for an independent drugstore
owner to set one up and staff it.
Regardless of which business model
pharmacies adopt, it is important to
assess why the store would benefit
from a clinic—would it increase visits
from regular customers or attract new
ones?

Scott argues that a large chance exists
that the store would benefit from a clinic.
Developments such as consumer-driven
health care, flexible spending accounts,
and higher deductibles on health insurance
plans have consumers taking more
control over their health and wellness
expenditures. "They are taking a much
more active role in how they think about
spending money on prescriptions, on
OTC products, and how they manage
visits to health care professionals," Scott
says. In doing this, individuals are turning
to their pharmacies for advice on
what health care options are most effective,
both in terms of patient outcome
and cost.

"That is why we have seen generic
prescriptions go up, flexible spending
accounts being used, and retail clinics
being used," Scott says. "The consumer
is saying, ?Help me figure out when I
really need to buy the brand prescription,
the generic prescription, or when
there is an OTC product that could give
me self-diagnosis, or help me understand
when I can use a retail clinic so that I can
get a great service at a fair price.'"

In an industry where pretty much
every retail establishment sells the same
products, pharmacies should concentrate
on service—the factor that sets
them apart from the competition. Not
only does this differentiate one store
from another, Scott says, but it also
strengthens the organization's relationship
with its consumers. "You get stronger,
deeper customer relationships when
you combine service with product."